IKEA Analyzing Consumer Markets

IKEA is an international home product company that designs & sells ready to assemble furniture appliances and home accessories.

It was founded in 1943 by a Ingvar Kamprad with a vision to offer home furnishings items of excellent quality at prices so low that the majority of people can afford to buy them.

Company which initially sold pen, eventually grew into a retail Titan in home furnishing, Business week calling it“One stop Sanctuary for home coolness” & “Quintessential cult brand”.

What are things IKEA is doing right to reach consumers in different markets and how they did it?

Finding smarter ways to make Furniture

Strategy followed by IKEA

Price

Quality

Implementation StepsEstablish Retail

Price

Select Manufacturer

Determine material used

Design process

Establish Retail Price• Using the matrix ,IKEA would set the price range.• It would survey the competition to establish a benchmark and sets its own price point 30-50% lower than rivals

Select Manufacturer• IKEA sources its products from multiple companies all over the world.

• It has more than 1800 manufacturer in more than 50 countries ensuring lowest price possible and thus transferring to customers.

Determine the Material used• Done by IKEA engineers, focus on cost efficiency.

• Using different type of wood for single wooden product.

• Using high quality materials for surface visible and most likely undergoing stress and vice versa.

Design Phase• Flat packaged boxes to make it easier for consumers to transport furniture home + save shipping cost thus transferring value.

• Innovative designs.

PROS of this strategy• Good furniture at low cost. • Simplicity in shopping and furniture assembly.

• Uniformity all over the world.

• Ensuring customer loyalty by offering rewards

CONS of this strategy • Less inclination to customer service.

• Visiting an IKEA store is not economical even through purchasing is.

• No innovation in products.

• Uniformity can turn into rigidity

CUSTOMER SERVICE

OPPURTUNITIES &What else could it be doing?• It can expand its business to luxury, interior designs and crockery products.

• It can expand its retail services to middle class emerging markets like China and India.

Emerging markets like China & India

RECAP• International home product company which sells ready to assemble furniture .• It establishes retail price ,sources its product from all over the world & designs the product to pass value to consumers.• Provides good furniture at low cost.• Less inclination to customer service.

DISCLAIMERCreated by Prashant Kumar Ojha, IIT BHUduring marketing Internship by Prof. Sameer Mathur, IIM Lucknow.